Source: Indian Express
Relevance – Data localization is being taken seriously in India. Aspirants must have knowledge of all aspects linked to it.
Synopsis: Recently, the Reserve Bank of India has barred three foreign card payment network companies (Mastercard, American Express, and Diners Club) from taking new customers on board over the issue of storing data in India.
- The RBI has stated that the payment systems need closer monitoring in the wake of the rising use of digital transactions.
- According to RBI data, there were 90.23 crore debit cards and 6.23 crore credit cards in India as of May 2021.
- As per the RBI circular on Storage of Payment System Data 2018, all system providers were directed to ensure that within six months the entire data relating to payment systems operated by them is stored in a system only in India.
- They were also required to report compliance to the RBI.
Meaning and Implication of this move of RBI:
- Non-compliance behind barring these companies from enrolling new customers:
- On July 14, the RBI imposed restrictions on Mastercard Asia Pacific from onboarding new domestic customers in India from July 22.
- It cited non-compliance with guidelines for the storage of data in India.
- The RBI said it had given almost three years for Mastercard to comply with the regulatory directions.
- Stakeholders affected by this move:
- Existing customers will not be affected, and they can continue using these cards.
- However, banks and non-banking finance companies that were planning to use these payment networks won’t be able to use these platforms to enroll new customers until the RBI lifts the ban.
- This leaves only Visa Inc and homegrown NPCI’s RuPay as payment providers under no restrictions.
- In the near term, there will be no impact on card issuers, but there could be a medium-term impact if this situation persists.
- Banks that were planning for new customers through Mastercard will have to look at Visa for enrollment.